Friday marked the eighth straight day of gains for the Dow Jones. This buoyed the Nasdaq (QQQ), Russell 2000 (IWM), and S&P 500 (SPY). What happens next?
Media fueled the rally with renewed hopes of interest rate cuts. Despite repeatedly stating that the Fed is data-driven on jobs and inflation data, the media is not listening. In April 2024, the U.S. economy did not add as many government jobs, leading to a weaker report. Last week’s weekly claims increased, further raising speculation of rate cuts.
Lower rates increase the attractiveness of stocks. Today, investors may ignore stock markets, hold money market funds from Schwab or Fidelity, and earn over 5.2% in interest income.
Chip Stocks Rise
Taiwan Semiconductor (TSM) said that sales jumped by 60%. It indicated that the market correctly anticipated strong, sustained sales for AI. Once manufacturers add AI solutions to smartphones, computers, and other electronics, their share price will rise, too. This includes Apple (AAPL), Qualcomm (QCOM), Best Buy (BBY), Lenovo (LNVGY), and Dell (DELL).
Your Takeaway
Take the rate-cut narrative off the table. The weak job report is a result of lower government hiring. Other sectors, except automotive, are hot. More importantly, inflation is persistently high. Investors may hedge inflation by holding gold (GLD) and energy stocks (XLE).
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